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For many people, the only way to afford a home is to finance it with a mortgage and pay off that loan over time.
During the third quarter of 2024, the median U.S. home sale price was $420,000, according to Federal Reserve data. Given that median annual wages were just over $60,000 during this year’s third quarter, it’s easy to see why the typical working American can barely afford a down payment on a home today, let alone the entire cost in one fell swoop.
But uber-wealthy folks are in a different position. Those with billions of dollars to their name can buy a home outright rather than take out a loan.
Yet celebrities like Mark Zuckerberg, Elon Musk and Jay-Z have all made headlines for taking out multimillion-dollar mortgages — not out of necessity but to reap a couple of key benefits.
It allows for better cash flow
Someone who’s a billionaire a couple or several times over may not have to worry so much about cash flow. But borrowing for a home allows them to hang onto their cash for other purposes, rather than tying their money up in an illiquid investment.
Take Hollywood’s it couple, Jay-Z and Beyonce, with a combined net worth of roughly $3 billion (as of 2023), for instance. But back in 2017, when their net worth was $1.6 billion, the power couple took out a $52 million loan to buy a hillside estate in Los Angeles., worth $88 million, according to a report published by the L.A. Times.
"Depending on how their portfolio looks — what they’ve invested in — I think there could be a huge benefit [to Beyoncé and Jay-Z]. It gives them flexibility, and they could pay the mortgage off anytime," Robert Cohan, managing director at Carlyle Financial, said in an interview with Business Insider.
You can still land an affordable mortgage rate even if you don’t fall in the category of America’s elite 1%](https://moneywise.com/managing-money/american-annual-income-class). The key is to not accept the first offer on the table — and to shop around and get quotes from at least two-three lenders.
According to a study conducted by LendingTree, 45% of homebuyers who received more than one quote got a lower rate than their initial one .
Mortgage Research Center can help you shop around for rates from vetted lenders near you.
All you need to do is enter some basic information about yourself, such as property type and zip code in which it is located, total cost, desired down payment, and your annual income and credit score.
Mortgage Research Center then matches you with lenders best suited to your needs. You can then set up a free, no-obligation consultation to further assess whether they’re the right fit for you.
Free up more money to invest
If you purchased a house in the last couple of years at a fixed rate, chances are you might be able to refinance it at a lower rate right now.
Mark Zuckerberg, the world’s third richest man (according to the Forbes Real Time Billionaires list) did the same.
Back in 2012, when Zuckerberg was #40 on the list with an estimated $15.6 billion net worth, he refinanced his home in Palo Alto, California, with a 30-year adjustable rate mortgage at 1.05%.
While rates probably won’t go down to that level any time soon, the Federal Reserve’s rate cuts over the past few months have already had a noticeable impact. Median mortgage rates are currently hovering around 6.84% — down from 8% in October last year.
With the Fed slated to lower the benchmark rates further in the upcoming months, it might be a good idea to start looking at your options.
Ideally, you can land a lower rate by shopping around. According to a study from LendingTree, 56% of homebuyers shopped around when they refinanced their mortgage. What’s more, 81% of those who chose to refinance, came away with a lower rate than what they started with.
Mortgage Research Center is also a beneficial tool if you are looking to refinance your current mortgage.
The process is the same — you need to enter some information about yourself and your current mortgage, and Mortgage Research Center will match you with vetted lenders offering competitive rates.
More ways to invest in real estate
Buying additional properties to yield rental or investment income can be inconvenient, even for accredited investors. Not only do you have to worry about timely maintenance and property taxes, but you also have to deal with the hassles of being a landlord if you are thinking about renting it out.
Crowdfunding investment opportunities can provide a way to build a passive real estate portfolio without doing any of the heavy lifting.
For example, accredited investors can invest in private REITs through DLP Capital’s investment funds. These investments are tax-advantaged and disburse positive cash flows (if any) through monthly, quarterly, or annual distributions. This means you can potentially generate passive income from real estate.
DLP Capital’s funds aim to generate annual returns in the range of 9% to 13%. This is at par with the S&P 500 index’s average return of 10.26%. But with DLP Capital, you get the added benefit of diversification by incorporating [income-producing real estate funds]](https://ribn.com/c/1/325/1563?placement=6) in your portfolio.
If you want a more affordable option or you want to wade into real estate for the first time, try investing through Arrived.
Backed by prominent investors like Jeff Bezos, Arrived allows you to invest in shares of rental homes and vacation properties without having to worry about managing the property.
You are also eligible to receive distributions from your investment property’s rental income, potentially helping you set up a passive income stream. You can get started with as little as $500.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
